REG 3

Question 1

In a distribution of property to a partner how do you treat substantially appreciated inventory or disproportionate distributions of unrealized receivables?

Answer 1

Gains are taxed as ordinary income

Question 2

In a liquidating dividend what if the partnership’s basis exceeds partner’s basis in partnership interest?

Answer 2

Question 3

How do you treat the net unearned income of a dependent child?

Kiddie Tax

Answer 3

Unearned income minus the sum of
* $1,150
* Greater of (1) $1,150 of the standard deduction or itemized deductions and (2) other allowable deductions

Question 4

How can you deduct rental expenses?

Answer 4

Lessee can deduct advance rental payments only to the tax period which the payments apply (true for cash and accrual).

Exception: If the rental contract is for 12 months or less, you can deduct in current period

Question 5

What are FUTA taxes?

Answer 5

• Tax imposed on employers (employees do not pay this)
• Tax is 6.0% of the first $7,000 of wages.

Question 6

What is the statute of limitations for a claim for refund related to worthless securities/bad debt?

Answer 6

7 years

Question 7

What are the NOL carry-forward and carry-back rules for tax years prior to 2018?

2017 and earlier

Answer 7

• NOLs can be carried back 2 years and carried forward 20 years
• NOL carry forwards can offset 100% of future taxable income

Question 8

What are the NOL carry-forward and carry-back rules for tax years 2018, 2019, and 2020?

Answer 8

• NOLs in 2018, 2019, and 2020 can be carried back 3 years and carried forward forever.
• NOL carry-forwards can offset 100% of taxable income in 2018, 2019, and 2020.
• NOL carry-forwards can offset 80% of taxable income in 2021 and furture years after deducting pre-2018 NOL carry forwards.

Question 9

What are the NOL carry-forward and carry-back rules for tax years 2021 and beyond?

Answer 9

• NOL carry-backs are not allowed
• NOLs can be carried-forward indefinitely only to the extent of 80% of taxable income

Question 10

What are the tests to be a qualifying child?

Answer 10

1. Relationship - Son, daughter, stepchild, foster child, brother, sister, or a descendent of any of them
2. Member of the Household - Lived with taxpaer for > half the year
3. Age - (1) Under the age of 19, (2) under the age of 24 and a full time student, any age if permanently disabled
4. Not Self-Supporting - Child must not have provided more than half their own support

Question 11

What are the tests to being a qualifying relative?

Answer 11

1. Relationship - Extended (e.g. grandparent, aunt) or immediate (e.g. parent, child, sibling); excludes cousins; if the unrelated person lives with taxpayer all year they qualify as ‘member of the household’
2. Gross Taxable Income - Gross income must be less than $4,300 for the year.
3. Support - Taxpayer provides more than half of the support
4. Cannot be taxpayers qualifying child or the qualifying child of any other taxpayer.